Westwood Net Lease Advisors has been helping our clients secure NNN lease investment properties for decades, in which time we have heard many myths that might stop potential investors from moving forward with lucrative commercial real estate opportunities. In case you’ve heard them too, here are the Top 5 Commercial Real Estate Myths we hear most often, and the truth of the matter.
Commercial real estate (CRE) myth number one is that with the economy in an upheaval, investors should hang on to their money and not buy investment properties. However, when it comes to triple-net lease properties, this may be an opportune time to invest.
In a slowing economy, if you purchase a property with a needs-based tenant and a corporate-guaranteed lease, such as Dollar General, DaVita, Fresenius, Walgreens, or 7-Eleven, your investment could remain stable for the 10-20-year lease term. Single-tenant NNN lease investments are not subject to the wild swings of the stock market, nor are they at the mercy of multi-tenant unpredictability, maintenance, and the potentially high-turnover that can occur in tough economic times. With interest rates low and cap rates stable, buying a NNN investment now could be a strong financial move that leads to a successful, sustainable long-term financial strategy, in any economy.
Commercial real estate myth number two is that retailers are going out of business altogether as e-commerce takes over. The truth is, there are plenty of needs-based retail businesses increasing revenue year-over-year. These companies are evolving with omnichannel distribution, responding to consumer demands, and adding locations in high-traffic, growing areas. Many of these corporations rely on their partnerships with real estate investors to continue to grow and provide products and services to their customers.
Commercial real estate myth number three is that you don’t need a down payment to purchase investment property. Chances are, this misinformation comes from those clickbait ads claiming, “no money down commercial property financing!” Well, in the triple-net market, there is really no such thing – which can be to the benefit of the investor. A 30-40% down-payment requirement keeps the market open to serious investors who can maximize low interest rates, lock-in long-term, secure financing with an investment-grade tenant and still have positive leverage to increase overall ROI. NNN investment financing options and down payment requirements are calculated on a case-by-case basis depending on the creditworthiness of the tenant, length of lease, location, and other factors.
Commercial real estate myth number four is that all real estate investments are high-risk, high-maintenance, and unpredictable. Real estate has a reputation for being at the mercy of unruly management expenses and a fickle rental and resale market. It’s also known for illiquidity and the high cost to diversify. However, there is one type of reliable, lower-risk real estate investment that can help you build a diversified portfolio and nullify all the objections – single-tenant, triple-net lease assets.
Absolute NNN lease tenants are most often strong credit, national companies such as Walgreens, Dollar General, and McDonalds. They pay all their own expenses – operating costs, taxes, maintenance, and capital improvements – and tend to thrive in any economy. You, as the owner, are protected from unpredictable and rising operating costs while collecting steady monthly income for up to twenty years, with little to no maintenance. You also benefit from capital-preserving tax advantages, such as cost segregation and depreciation.
When compared to other types of higher-risk investments, like the stock market or multi-tenant properties and apartment complexes, one can see why NNN lease properties are considered safe, nearly recession-proof, dependable investments that provide predictable monthly income for decades.
Commercial real estate myth number five is that you have to be a multi-millionaire to invest in commercial properties. This is not the case. Single-tenant NNN investment properties can start at around $800,000, which would equate to a down payment of about $300,000. Many buyers use their retirement savings, some invest their inheritance, and others trade higher-maintenance properties or other types of investments for stable NNN properties.
NNN investments are an excellent way to create financial security in retirement and earn a stable monthly income or build wealth early in your career with growth-based real estate. To find the best property options for your budget and goals, contact a buyer’s advisor who will help you find just what you’re looking for.
To Wrap it Up – The Top 5 Commercial Real Estate Myths Dispelled
There are many reasons to proceed with caution if you are investing in multi-tenant or residential rental real estate, namely the maintenance, expenses, and unpredictability of the investments. Conversely, if you choose NNN lease investing, though there are inherent risks in any type of investing, the top five myths of CRE investing are dispelled, and you can feel comfortable knowing your chance of a long-term, reliable monthly income with time-freedom and financial benefits are almost certain.
Whether you are new to commercial real estate or a seasoned investor, Westwood Net Lease Advisors is here to help you learn the NNN lease investment market, facilitate 1031 exchanges, and provide personal representation from the property search through close, at no cost to you. Contact us today for your free, no-obligation consultation. 314-997-5227